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Cards and Canucks

OAS delay to age 67 presents opportunities

A recent Ipsos Reid poll reports that 74 per cent of Canadians oppose the federal government’s proposal to postpone the start of Old Age Security payments until age 67.

Take a deep breath. That amendment won’t affect seniors already receiving OAS or soon-to-be retirees. Some analysts say the change won’t be implemented for years.

So what’s the big deal?

OAS damage control in perspective
Granted, if the changes do go into effect, some of us will have to wait an extra two years before receiving our first monthly OAS cheque, which is worth up to $540.12 in 2012. The full OAS amount is available to Canadians who have lived in Canada for at least 40 years after age 18, and whose annual earnings fall below $69,652.

People who focus on losing OAS cheques during the 24-month period from ages 65 to 67 might argue that the government wants to take $12,962.88 ($540.12 times 24) out of their pockets.

But based on Mackenzie Financial’s RRSP calculator, a 55-year-old can easily replace the future value of the missing $540.12 in monthly OAS payments from ages 65 to 66 by contributing $65 per month to his or her RRSP. That RRSP contribution assumes an 8 per cent annual increase in investment value.

Canada Pension Plan improvementsCritics of the proposed OAS age deferral also fail to mention that Canada Pension Plan retirement benefits have been enriched as of 2012. Basically, the program is giving Canadians incentives to wait until after age 65 to start collecting CPP cheques.

Here’s how these incentives work: Once you hit age 65, the value of your future CPP cheques will start increasing by 0.64 per cent for each month you forego receiving a cheque. In other words, once you do decide to start cashing in, your cheques will be bigger. Begin collecting CPP at age 67, and your monthly payment will be 15.4 per cent higher.

For example, a CPP cheque for $581 commencing at age 65 now becomes a $670 monthly payout if retirement begins at age 67 instead.

Personally, I’ll gain an estimated $250 in monthly CPP payments just by retiring two years later.

Older workers become the norm
Of course, larger CPP payouts don’t include the additional earnings that Canadians can generate after age 65. By working 16 hours per week at a part-time job in Ontario, where the minimum wage is $10.25, most seniors can earn an extra $656 monthly in retail jobs, security positions, consulting projects and other opportunities.

Even before plans to delay OAS payouts to age 67 were announced, many Canadians were already intent on working longer in their golden years.